9 – Profit & Non-Profit

I) Altruistic Capitalism

It is the basic premise of this program that it is possible to use a moral and honest business model to bring about idealistic and sustainable change to almost any challenge that this planet faces.

In the past, idealistic people did not always get to live according to their ideals. Unless they were somehow successful in their creative or artistic endeavors they ended up as a starving artist or they would have to compromise and ‘get a job’.

In today’s current economic climate relatively few people are able to work for social or environmental change because they are too busy trying to feed themselves and their family.

There is nothing inherently evil about capitalism. Just like money is neutral, so is the capitalist model. It’s all about how you engage with the system that matters, not necessarily the system itself.

Capitalism is defined as an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth.

Positive Capitalism works within the system to change the system.

Profit is not inherently bad. If your business makes a profit and pays taxes, you have a louder voice to lobby for political change in a productive, positive way.

By proudly paying taxes with an activist business, in a way that resonates with your value system, you will sleep well at night knowing you are doing your part to create a more just world.

II) Capitalism as Conflict: Identifying Paths of Rectification

For some individuals, the Capitalist model is a model of inherent conflict. Many people hear the word “Capitalism,” and immediately begin pontificating on all its conflicting forces:

    • —- Haves vs. Have Nots (Rich vs. Poor)
    • —- Supply vs. Demand
    • —- Employer vs. Employee
      • —- Private vs. Public
      • —- Bourgeois vs. Proletariat
    • —- I want vs. I make (Consumption vs. Production)

This is a polarizing way of thinking about the problem of Capitalism that does little to address global economic injustice. If you are serious about changing the world, try to think in a pragmatic way about the problem. Finger pointing and petty arguments will not solve any tenacious, complicated issue. Unnecessary inequality has been around for a long time.

Non-Profits versus profitable social enterprises as agents for effective change.

Though there are tax disadvantages, there are reasons why socially responsible business methods are actually more effective agents for social change than other methods such as charities or nonprofits.

Most non-profits spend a large amount of their time and energy applying for grants to keep their operations going. This by its very nature is unsustainable. A non-profit may earn income but that does not seem as important as the ability to always find donors.

A social enterprise emphasizes trade, not aid. Aid recipients are not empowered; they are dependent. On the other hand, fair-trade business relationships tend to be more respectful because they are based on trade which can be mutually beneficial and thus give greater equality.

When a business is able to play a role in social development or environmental protection and make a profit, this is much more sustainable. It gives an income to the owner. And it can give good long-term jobs to committed and like-minded employees.

Furthermore, by making a profit, it is able to invest and grow without having to beg. Most nonprofits spend an inordinate amount of time, fundraising aka ‘begging’ rather than concentrating on providing the best goods or services that further their cause.

Oil companies are able to make lots of money and in so doing, they can pay lobbyists to change laws favorable to their interests. Social enterprises that make money can do the same!

We are not against non-profits. Meaningful employment is something that is very desirable; to make a living doing something for people or the planet?

Many nonprofits and charitable organizations are uncomfortable with the idea of making money and helping people or the environment. For example, when the Grameen bank was created to give Micro-loans to the poor, many traditional aid agencies were mortified. You cannot lend money to the poor; it should just be given.

As many aid “recipients” have now pointed out, charity does not bring dignity. Nor does it change the underlying causes of poverty. However, those micro-loans and the support structure they developed have literally helped millions of women from around the world learn and practice the art of trade which is a much more sustainable form of assistance than simply giving food or aid.

In other words, we would argue for Trade, not Aid! Fair-Trade creates employment with dignity. Aid creates dependency with an underlying tone of resentment.

To provide a real-world illustration of how differently traditional non-profits and social enterprises operate, we’ll now look at two established organizations: Soluciones Comunitarias from Latin America and the Youth Coalition for the Consolidation of Democracy in Africa.

In the poorest district of one of the poorest countries in the world, Frances Folley and an unpaid team of five dedicate their lives to helping the neediest families and children in their community. Their organization, the Youth Coalition for the Consolidation of Democracy (YCD), is a traditional non-profit organization in Malawi that works to send children to school, rehabilitate prisoners, and advocate for injustice against women and the rural poor.

The organization is financed exclusively through grants and donations, mostly generated from overseas due to the lack of capital in Malawi and a proliferation of non-profit organizations competing for local and regional funding. The team spends a good portion of their hours finding and writing grants or building relationships with international donors, which is time not spent visiting the schools and prisons where their mission-aligned work takes place. They’ve also faced challenges in maintaining their autonomy when international organizations, corporations or individuals providing the funding have their own goals and ideas for their projects.

While the fundraising method has kept the organization afloat for over five years, it has resulted in financial resources fluctuating greatly from year to year, producing an undesirable effect on programmatic activities and the sustainability of the organization overall. It’s also meant a reduced effectiveness of truly worthwhile initiatives.

If YCD is able to develop income-generating projects that incorporate the organization’s mission into a revenue-generating activity (one idea has been to micro-consign the bikes to youth in need of employment, helping both the youth and YCD generate income), the organization will be able to flourish with stability and self-sovereignty.

On the other side of the world, an innovative social enterprise called Soluciones Comunitarias (SolCom) is using a “MicroConsignment” model to ensure the organization’s work across multiple countries in Latin America is self-sustainable. Instead of giving away things that people living in rural parts of Guatemala or Ecuador may or may not find useful, Soluciones Comunitarias trains local entrepreneurs to sell products like eyeglasses, energy-saving light bulbs, and wood-burning stoves at prices that are affordable to locals.

This model ensures that 1) the products being distributed are valued by the community members since they are making the decision to purchase them, 2) SolCom is generating revenue that covers the cost of the products, provides income to the local entrepreneur, and covers SolCom’s bottom line, and 3) ensures a dignified transaction where people have the choice to invest in a fairly-priced and useful item — or not.

This model also addresses two of the core needs in rural areas in South and Central America: the access to products or services and a lack of jobs. SolCom’s model provides jobs to locals as well as access to simple, affordable things that improve a purchaser’s quality of life. Eyeglasses help weavers do their work. Wood-burning stoves save time for busy women cooking for the family. Light bulbs help kids do their homework and lengthen a day’s productivity window.

Additionally, having locals selling the products instead of foreigners giving them away allows for a much greater reach. In Guatemala, the local entrepreneurs speak ten languages and have sold their products and services in over 750 villages across Guatemala. Even if a foreigner speaks fluent Spanish, there are many departments of the country where Spanish isn’t even spoken. Also, a MicroConsignment entrepreneur earns an average of $2 per hour where an average hourly wage is fifty cents, bringing higher earnings into the community at large.

Most critically, the revenue from the sale — instead of free distribution — of these products is reinvested in the continuous operation of the organization itself. Founder and Ashoka Fellow Greg Van Kirk notes that he is not motivated by the desire to build a for-profit business, but rather a self-sustaining model that improves the health and economic welfare of rural villagers.

“MORAL INCOME Making Money from Doing Good”

By establishing a profitable business that promotes your causes, you can create a truly sustainable social enterprise, one that is not dependent on handouts like a traditional non-profit but one that can devote its energy to the causes that it represents.

As we’ve seen in the examples above, traditional nonprofits spend a disproportionate amount of their time and resources simply applying for grants and other sources of funding. And even when they receive funding, there are often many strings attached. Profit, as in the case of SolCom, which has spread across 5 different countries in Latin America, allows you to re-invest and grow without the bureaucratic restrictions of a non-profit.

However, you cannot engage in ‘greenwashing’. Your profits must come from a business that truly does improve people’s lives or the planet. Otherwise, your business is built on a lie that will eventually be exposed. And then those ‘profits’ will evaporate as quickly as they came. So always be true to your purpose so that your profit has a moral foundation.

Miscellaneous Material:

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